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Kate Summers
Research Assistant
Kate Summers

Universal Credit’s monthly payments: A nudge towards employment?

Authors: Kate Summers

02 October 2013

Research published by the Payments Council yesterday (1st October) found that one in every two people eligible for Universal Credit thought that the change to monthly payments would make it more difficult for them to manage their money.

While most other benefits are currently paid fortnightly, the DWP say that the new Universal Credit monthly payments are preferable because they emulate the payment of a salary, and so nudge people towards behaviours (i.e. managing their money on the same timescale as if they were in work) that will make it easier for them to take on a job. However, this justification misses a couple of important points about how salaries are paid and why people use short-term budgeting methods, which make the difficulties predicted by the Payments Council hard to justify. 

It is important to recognise that not all salaries are paid monthly. One fifth of UK employees are paid weekly or fortnightly, and only half of employees earning less than £10,000 are paid on a monthly basis. For people already in these low-earning jobs who are eligible for Universal Credit, or for people who move into them, monthly benefit payments will be incompatible with the timescale on which they receive their salary.

There is also evidence to suggest that the timescale on which people budget is linked to their income level, and not to their employment status. Setting levels of social security payments are a separate, complex debate, but it is fair to say those in receipt of Universal Credit – whether they are in or out of work – will be on low incomes. The lower someone’s income, the shorter the time period over which they budget.

Short term budgeting periods are linked to what academics have called “tight control” practices. “Tight control” methods are used by those on low incomes to keep on top of their spending. Methods include dealing with all your money in cash so you know when you have run out, and using pay-as-you-go cards for your utilities so you are not hit by a large bill at the end of the month. Monthly payments may well provide an additional challenge to those on a low income, as opposed to a ‘nudge’ towards employment.

Universal Credit’s monthly payments are likely to be out of sync with many recipients’ salary receipt patterns, and also make it much more difficult for recipients to use the “tight control” budgeting techniques that make it possible to get by on a low income. As far as the aim of monthly payments is encouraging employment-oriented behaviour, it is hard to see how the financial difficulties predicted by the Payments Council will be worth it.